Here come the discountmobiles
China crisis?
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Here Come the Discountmobiles
A year ago, The People's Daily, one of the Chinese government newspapers, ran a short, tantalizing item announcing that 252 Chinese-made economy cars had been shipped to Port Everglades in Florida, the first Chinese cars exported to the United States. A Boca Raton company planned on receiving 25,000 of these cars, known as Xialis, over the next five years. The small cars are the same models that swarm Beijing as bumpy red taxis, getting a miraculous 56 miles to the gallon and costing under $6,000 in China.
The news took hold in the recess of my brain reserved for browsing at Costco, where I have become hopelessly addicted to deflation. I have become a kind of retail Manchurian Candidate, reflexively piling my cart with ever-cheaper DVD players, T-shirts and socket-wrench sets. If Chinese manufacturers do to cars what they have done to toys, clothes and electronics, a Chinese economy car might just qualify as an impulse item.
Alas, the Xiali never made it to the streets of America. The importer folded. The cars, which even Chinese drivers buy only as a last resort, were re-exported out of Florida to downmarket climes where warranty service comes cheap. But the brief flicker of news about the Xialis shed light on possibilities both promising and dangerous: can China make a good $6,000 car for the U.S. market? What might it look like? And is there any chance I'll ever be able to buy one at Costco?
Supercheap cars already exist all over the world. Brazilians and Russians make frumpy sub-$10,000 cars by the hundreds of thousands, but they know better than to bring them to the United States, where they would fall perilously short of safety and performance standards. The Korean company Kia Motors currently makes the lowest-priced sedan in the United States, the Rio, which lists with no extras at $9,665. That buys basic transportation: 104 horsepower and the road feel of a kangaroo. One reviewer, struggling to say something nice, wrote that if you ''keep engine r.p.m. up . . . the Rio can stay with the flow of traffic on the highway.''
The earliest Chinese export car might not be much better. ''A first automotive product here,'' speculates Kevin Smith, the editor of Motor Trend, ''would represent the bottom of the market in features, refinement and quality, but it won't be too far behind its competition.'' Smith points out that it took the Koreans 10 years to get their cars up to a quality acceptable to American buyers. He says he thinks the Chinese may get there in significantly less time.
As it stands right now, virtually every big international automaker is building vehicles in China. The first Chinese car exported to the United States may well be a model of car already sold here; a Chinese-made Volkswagen Jetta or Honda Civic perhaps. Those, however, would not be the Chinese cars that bust open the low end of the market. That car would probably come into the States under a name few Americans will have heard of. And it will arrive, just as dirt-cheap consumer electronics did, only after China puts in place the hyperefficient industrial infrastructure that will allow it to cut prices to the bone. There is a long way to go on this; most cars still cost more to make in China now than in the West, Japan and Korea because the industry is so diffuse -- factories are relatively small, many parts have to be imported and infrastructure like roads are unreliable.
But the price slope is getting slippery. Michael J. Dunne, who runs a Beijing-based consulting firm called Automotive Resources Asia, describes China's auto business as the most exciting, fast growing and unpredictable in the world today. The market is voracious. Car sales in China rose an astonishing 82.4 percent in the first six months of this year, to 842,800. By 2010, the country should surpass Germany as the No. 3 auto producer, and some speculate that it will catch the United States by 2020. Though the number of cars sold in China is a fraction of the 17 million sold here last year, the market potential, like everything else in China, is mind-boggling. The Chinese middle class will soon top 100 million, and they will want cars not only as transportation but as an emblem of their place in society.
Source: NYTimes.com
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